From novel pharmaceuticals to telemedicine, most healthcare companies are on a mission to drive better patient outcomes. But speed bumps such as inventory destockings have persisted in the wake of COVID-19, and over the past six months, the industry has pulled back by 13.2%. This performance was significantly worse than the S&P 500’s 2.4% decline.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here are two healthcare stocks we think can generate sustainable market-beating returns and one we’re passing on.
One HealthcareStock to Sell:
Jazz Pharmaceuticals (JAZZ)
Market Cap: $6.66 billion
Originally founded in 2003 and now headquartered in Ireland following a 2012 tax inversion merger, Jazz Pharmaceuticals (NASDAQGS:JAZZ) develops and markets medicines for sleep disorders, epilepsy, and cancer, with a focus on treatments for patients with limited therapeutic options.
Why Does JAZZ Worry Us?
- Annual revenue growth of 4.3% over the last two years was below our standards for the healthcare sector
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 6.7 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
At $108.25 per share, Jazz Pharmaceuticals trades at 4.6x forward P/E. If you’re considering JAZZ for your portfolio, see our FREE research report to learn more.
Two Healthcare Stocks to Watch:
ResMed (RMD)
Market Cap: $35.87 billion
Founded in 1989 to address the then-underdiagnosed condition of sleep apnea, ResMed (NYSE: RMD) develops cloud-connected medical devices and software solutions that treat sleep apnea, COPD, and other respiratory disorders for home and clinical use.
Why Are We Fans of RMD?
- Business is well-positioned no matter the global macroeconomic backdrop as its constant currency revenue growth averaged 12% over the past two years
- Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 15.7% outpaced its revenue gains
- Free cash flow margin increased by 7.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
ResMed is trading at $244.79 per share, or 24.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Cencora (COR)
Market Cap: $56.45 billion
Formerly known as AmerisourceBergen until its 2023 rebranding, Cencora (NYSE: COR) is a global pharmaceutical distribution company that connects manufacturers with healthcare providers while offering logistics, data analytics, and consulting services.
Why Are We Bullish on COR?
- Unparalleled scale of $310.2 billion in revenue enables it to spread administrative costs across a larger membership base
- Share repurchases over the last five years enabled its annual earnings per share growth of 14.5% to outpace its revenue gains
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
Cencora’s stock price of $291.24 implies a valuation ratio of 18x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
